This quiz works best with JavaScript enabled. Home > Economics > Macroeconomics > Inflation And Deflation > Inflation And Deflation – Quiz 20 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Inflation And Deflation Quiz 20 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. How is the bank affected by inflation? Bank has loaned millions for mortgages at a fixed rate of interest. A) Helped. B) Hurt. C) Not affected directly. D) None of above. Show Answer Correct Answer: B) Hurt. 2. Higher prices mean money is worth (a) . A) A less. B) More. Show Answer Correct Answer: A) A less. 3. What is the main cause of the housing bubble in the early 2000s? A) A decrease in demand for housing. B) A decrease in population. C) A shortage in building materials. D) Low interest rates and deceitful lending practices. Show Answer Correct Answer: D) Low interest rates and deceitful lending practices. 4. Wage-Price Spiral A) Rising wages causing higher prices which cause higher wages. B) Income that does not increase even when prices go up. C) A sustained drop in the price of goods. D) A measurement that shows how the average cost of goods or services change over time. Show Answer Correct Answer: A) Rising wages causing higher prices which cause higher wages. 5. A government is faced with rising inflation. It wishes to reduce inflationary pressure while avoiding a fall in output. Which action is most likely to meet its needs? A) An increase in laws to promote competition. B) An increase in taxation. C) An increase in the budget surplus. D) An increase in the exchange rate tagsInflation, Deflation, Disinflation. Show Answer Correct Answer: A) An increase in laws to promote competition. 6. Which of the following statements is/are correct? One way to combat demand-pull inflation.i. is if the Reserve Bank raises the interest rates.ii.Demand-pull inflation usually leads to increased prices and increased unemployment.iii.Demand-pull inflation can be initiated by a cut in the marginal tax rate. A) I and ii. B) I and iii. C) Ii and ii. D) All three statements are correct. Show Answer Correct Answer: B) I and iii. 7. What's the lowest point of real GDP called? A) Expansion. B) Trough. C) Contraction. D) Peak. Show Answer Correct Answer: B) Trough. 8. Suppose that, because of inflation, a business in Russia must calculate, print, and mail a new price list to its customers each month. This is an example of A) Shoeleather costs. B) Costs due to confusion and inconvenience. C) Arbitrary redistributions of wealth. D) Costs due to inflation induced tax distortions. E) Menu costs. Show Answer Correct Answer: E) Menu costs. 9. Which of the following factors will cause demand-pull inflation? A) A fall in government spending. B) A fall in interest rates. C) An increase in taxation. D) Falling consumer confidence. Show Answer Correct Answer: B) A fall in interest rates. 10. The effects of inflation on the price competitiveness of a country's products may be offset by: A) An appreciation of the currency. B) A revaluation of the currency. C) A depreciation of the currency. D) Lower inflation abroad. Show Answer Correct Answer: C) A depreciation of the currency. 11. Inflation works its way quickly into the economy through retail prices. A) True. B) False. Show Answer Correct Answer: B) False. 12. Which out of the following is phenomenon that leads to Cost-Push Inflation? A) It is a situation when aggregate demand in an economy outpaces aggregate supply. B) It is a situation of persistent rise in inflation along with dip in growth and increase in unemployment. C) It is a situation caused by an increase in prices of inputs like labour, raw material etc. D) It is a situation when a nation experiences very high and accelerating inflation. Show Answer Correct Answer: C) It is a situation caused by an increase in prices of inputs like labour, raw material etc. 13. What cause of inflation comes from an increase in commodity prices such as oil and wheat, or an increase in wages? A) Cost-push inflation. B) Demand-pull inflation. C) Price-push inflation. D) Supply-pull inflation. E) None of the answers. Show Answer Correct Answer: A) Cost-push inflation. 14. What is the main lesson to learn from understanding inflation? A) How to negotiate a raise at work. B) The importance of saving money. C) The impact of economic mismanagement. D) The dangers of speculative bubbles. Show Answer Correct Answer: D) The dangers of speculative bubbles. 15. ..... indicates a change in the general price level in the economy. A) WPI. B) CPI. C) Food Basket. D) None of above. Show Answer Correct Answer: A) WPI. 16. Demand-pull inflation may be caused by: A) Always reduces the cost of living. B) A reduction in interest rates. C) A reduction in government spending. D) N outward shift in aggregate supply. Show Answer Correct Answer: B) A reduction in interest rates. 17. ..... is when prices are pulled up because demand for them is greater than supply. A) Consumer Price Index (CPI). B) Demand-Pull Inflation. C) Deflation. D) Fixed Income. Show Answer Correct Answer: B) Demand-Pull Inflation. 18. Which is the first stage when calculating the price level in the UK? A) Office of National Statistics interviews 650 households to find the 7000 most common goods and services and the % spent on each. B) Office of National Statistics interviews 70 households to find the 6500 most common goods and services and the % spent on each. C) Office of National Statistics interviews 7000 households to find the 650 most common goods and services and the % spent on each. D) Office of National Statistics interviews 700 households to find the 600 most common goods and services and the % spent on each. Show Answer Correct Answer: C) Office of National Statistics interviews 7000 households to find the 650 most common goods and services and the % spent on each. 19. Which of the following is most likely to be a cause of deflation A) An increase in the supply of cash printed by the central bank. B) An increase in Oil prices. C) A reduction in income tax. D) An improvement in technology. Show Answer Correct Answer: D) An improvement in technology. 20. What are the base years for the CPI (Consumer Price Index)? A) 1913-1915. B) 1982-1984. C) 1974-1976. D) None of above. Show Answer Correct Answer: B) 1982-1984. ← PreviousNext →Related QuizzesMacroeconomics QuizzesEconomics QuizzesInflation And Deflation Quiz 1Inflation And Deflation Quiz 2Inflation And Deflation Quiz 3Inflation And Deflation Quiz 4Inflation And Deflation Quiz 5Inflation And Deflation Quiz 6Inflation And Deflation Quiz 7Inflation And Deflation Quiz 8 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books